[UPDATED] New Hospices Cropping Up in Fraud Hotbeds Amid Ongoing Program Integrity Push

A new report is casting doubt on the heightened regulatory efforts seeking to curb fraud, waste and abuse from hospice agencies in select states.

The questionable success of those oversight efforts is best reflected in the fraud hotbed of California, which continues to see a swarm of new hospices emerging and receiving federal funding, despite a ban on new licenses.

Published Thursday, a ProPublica investigation found that new hospices in California are still receiving Medicare certification amid the increased regulatory scrutiny around program integrity. Other states with known hospice-fraud issues include Arizona, Nevada and Texas.

In one instance, 15 new hospices received Medicare certification, all operating from the same two-story building in Los Angeles, ProPublica reported.

In another: One location in Phoenix was approved for three new hospice licenses in 2023, all at the same location as dozens of other new providers in the past two years, according to ProPublica.

“The Department of Public Health is doing a fantastic job of trying to clean it up here in California, but they can’t clean it up fast enough if [the U.S. Centers for Medicare & Medicaid Services (CMS)] keeps allowing new hospices to charge for patients,” Sheila Clark, president and CEO of the California Hospice and Palliative Care Association, told ProPublica.

In fact, multiple new hospices have been approved by CMS to operate in California since ProPublica finalized its story. A source familiar with the topic who reviewed hospice data told Hospice News that at least four new hospices had been enrolled.

Of several dozen hospices enrolled between Jan. 1, 2023, and April 30, 2023, many are already billing Medicare, too, the source confirmed.

California, Arizona, Nevada and Texas have been on regulators’ radar because of these states seeing hundreds of newly licensed hospice operators in recent years – far more than what’s typical compared to national trends. Multiple reports of unethical or illegal practices have surfaced, particularly among new companies.

In some instances, multiple hospices have been operating out of the same address without a corresponding increase in the population of eligible patients. Some individuals also hold management positions at several of these hospices simultaneously.

In other cases, some patients who were not eligible for hospice were enrolled without their knowledge or consent, while other instances have occurred in which hospice patients did not receive care for billed services.

In response to program integrity concerns, federal and state regulators have ramped up program integrity oversight in the hospice space.

California in 2021 passed two reform laws that included a moratorium on new hospice provider licenses until the California Department of Public Health (CDPH) set emergency regulations. The state was not to issue new licenses unless regulators made a written finding that a particular region has a demonstrable need for additional providers. The agency had a deadline of Jan. 1, 2024, to set new emergency regulations.

CMS has also taken greater steps to address hospice program integrity. Provisions in its 2024 home health rule included the implementation of a 36-month rule for hospice providers. The final rule forbids any change in majority ownership during the 36 months after initial Medicare enrollment, including acquisitions, stock transactions or mergers.

CMS in the rule also moved forward implementing the Special Focus Program (SFP), effective Jan. 1. The program has the authority to impose enforcement remedies against hospices with poor performance based on its algorithm. Hospices flagged by the SFP also will be surveyed every six months rather than the current three-year cycle and could face monetary penalties or expulsion from the Medicare program

Congress mandated the SFP in the Consolidated Appropriations Act of 2021, which contained language from the Helping Our Senior Population in Comfort Environments (HOSPICE) Act.

In January 2023, a coalition of four industry organizations made 34 recommendations to CMS and Congress for strengthening hospice oversight. These included the National Association for Home Care & Hospice (NAHC), the National Hospice and Palliative Care Organization (NHPCO), LeadingAge, and the National Partnership for Healthcare and Hospice Innovation (NPHI).

“While CMS has implemented many of our program integrity recommendations to root out bad actors, the data make it clear that more needs to be done, and that the hospice Special Focus Program is not the right tool for fraud prevention,” Ben Marcantonio, NHPCO COO and interim CEO, told Hospice News in an email. “The flawed algorithm of the SFP does not support original congressional intent to help lower quality providers improve on patient care delivery and does not directly address the steady growth of newly licensed hospices in 2023, of which nearly 70% are located in Arizona, California, Nevada and Texas.”

Regulatory efforts may not be enough to curb maleficent activity in hospice.

Medicare claims data shows that 102 new enrolled hospices entered California in 2023. Arizona also saw a rise of 25 new hospices during the last year, with Texas and Nevada seeing 72 and 25 new providers, respectively.

No other state had more than 15 new hospices enrolled, with most having single-digit enrollment, according to the data.

Overall, about 69% of all newly licensed hospices in 2023 were located in Arizona, California, Nevada and Texas.

“Fraud and quality are both important issues but they are not the same,” Marcantonio said. “Limiting enrollment of new providers with a targeted moratorium on new hospices remains our top recommendation to CMS to address fraudulent activity.”